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24 Apr 2018 18:19
A number of South African companies have chosen to stop using the services of the auditors. (Delwyn Verasamy/M&G)
Auditing company KPMG, which has been under fire in South Africa for its audits of Gupta-owned companies and its role in the so-called rogue unit report, is facing possible shareholder protests in the US.
The Financial Times reported on Tuesday that KPMG could face protests over its audits of major clients Wells Fargo and General Electric.
According to the FT, the global auditor has come under scrutiny over fake accounts and other scandals at financial services company Wells Fargo.
The scandal included the opening of about two million bank accounts in customers’ names without their approval or knowledge.
Shares in multinational conglomerate GE, meanwhile, have declined sharply over the past year due in part to “financial difficulties including a need to prop up reserves over unexpected insurance liabilities”, stated the FT.
The newspaper reported that shareholder advisory service Glass Lewis has recommended that investors in Wells Fargo and GE vote against retaining KPMG as the bank’s auditor.
Wells Fargo will hold its 2018 annual meeting of shareholders on Tuesday in Des Moines, Iowa. The meeting will start at around 17:00 South African time.
General Electric, meanwhile, is holding its 2018 annual meeting on Wednesday in Imperial, Pennsylvania. It will start at about 4pm South African time. KPMG did not immediately respond to a request for comment.
As KPMG in the US comes under scrutiny, KPMG South Africa has been fighting to extinguish fires for the past year.
In September 2017 the auditing group’s top local leadership, including its former South African CEO Trevor Hoole, resigned following an internal investigation into the firm’s auditing work for Gupta-linked companies.
READ MORE: KPMG exec embroiled in VBS probe
The auditing firm also withdrew the findings of its controversial South African Revenue Service “rogue unit” report, which was used by the Hawks and the National Prosecuting Authority to launch an investigation into the unit.
Shortly after the report was released, KPMG International chair John Veihmeyer apologised for the work the auditing firm had done in South Africa for Gupta-linked companies and SARS, saying “this is not who we are”.
“KPMG International undertook an investigation, with the help of independent legal advisers, which found a number of failings in a report prepared for the South African Revenue Service and in the decisions made, over time, to continue working for the Guptas.
“KPMG South Africa made serious mistakes and errors of judgement in these engagements,” he said four days after KPMG SA’s leadership team was reshuffled.
A number of South African companies chose to stop using the services of the auditors.
In early October 2017 its new CEO Nhlamu Dlomu told Fin24 in an interview that an accumulation of “red flags” in the Gupta’s accounts in time compelled the firm to cut its ties with companies linked to the family.
She added that employees have become “hypersensitised” to the failures of the past and are striving to rebuild trust. “We are doing things differently now,” she said.
In January 2018, Professor Wiseman Nkuhlu was named the group’s new chairperson. But the group again made headlines for the wrong reasons in mid-April when it announced the resignation of two partners facing disciplinary charges related to work done for VBS Mutual Bank.
“This has been a very disappointing episode for KPMG. There can be no tolerance, however, of any conduct that compromises our reputation and we have moved decisively to deal with the situation,” said Dlomu.
The following day, Nkuhlu announced KPMG would launch a review of all its work done by partners over the last 18 months in a bid to regain public trust.
READ MORE: KPMG ‘opening itself up to scrutiny’ with review of 200 files
Nkhulu’s promise of a review was not enough for Auditor General Kimi Makwetu, who shortly thereafter announced the termination of the the government’s auditing contracts with KPMG and Nkonki Inc, another auditing firm.
The contracted firms were obliged to “stringently follow” the AG’s auditing standards as well as its ethics, said the AG. “Once these have been fundamentally impacted, we are called upon to review and reassess our position.”
While KPMG said it hoped the AG’s decision would be only a “temporary break”, the news helped sink Nkonki Inc.
It announced on Monday evening that it was closing its largest office in the wake of the public sector work ban. – Fin24
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